20VC: Anthropic vs The Pentagon: Who Wins | OpenAI's $110BN Mega Round | Cursor Hits $2BN in ARR | Block's 40% Headcount Reduction: AI or Overhiring

21:28Harry Stebbings:You're logically right, Rory, but Jason is rationally correct. No, I disagree. The majority of governments around the world are not sufficiently versed in artificial intelligence and deployment and evolution of it to make sound decisions. I think we would all agree on that. I wouldn't. Look, by definition, if you're running the government, on any individual thing, experts know more. Your job is not to be the expert. Your job is to be able to manage the experts, right? And I think it's the same mistake, frankly, that folks made in COVID where they did defer to science. No, it's listen to science and make informed judgments.

22:05Now, you might argue that the people making those judgments at various times have been mediocre or even bad at judgments. But the way to solve that is to elect different people to make judgments. You can say, I don't trust the U.S. government, so I don't want to deal with them. That's a totally rational thing to do up until the moment when they invoked the Defense Production Act, right? Totally rational. But what you cannot do is say, I'd like my$200 million, but I'd like to tell you what to do as well. Just one interesting thing on the deal, just structurally, putting aside, and then we can move on.

22:32Like, it was being negotiated before it was being signed, right? By the nature of any big deal. So it was signed last summer. That means Anthropica was probably closer to a billion dollar run rate and still trying to break it because it was a billion dollars in January of 2025. So signing a$200 million deal plus 200 million from Palantir pull through, okay, plus blocking your competitor from Palantir and others, that was probably a pretty big deal at the time. That was probably one where like he was honest that he swallowed some of his principles like raising money from sovereign wealth countries, but it was so important to winning in the enterprise and building this cloud.

23:08It probably actually made more sense to take the risk at a billion-ish, right? Then at 15 billion, where you're like, oh, you know, everyone's gonna be like, you throw away the 400 with Palantir. Okay. 200, 200. Tougher decision at a billion run rate. Like most of our portfolio companies, if they came in and said, we can grow an extra 40 % this year, if we sign a contract, we'd kind of rather not sign, but it's totally legal. And Rory, instead of growing 60 % this year and having no exit, we can grow 110%. I think most investors are going to say, take the deal, swallow your pride, right? And so it was a bigger deal at the time than it is today, I think, right?

23:45Agreed. But I actually genuinely, now having been harsh, I'm going to compliment. I don't think this happened because they needed the money then and they don't need the money now. I think like often happens in life. People drifted into a situation that nobody fully thought true. And then you end up at this point, even though you didn't plan to be there. I'm sure I think actually the relationship happened initially by Palantir. So they were selling to Palantir as one would a great customer to sell to Palantir sells to the government, you get dragged in and you probably sit there thinking, well, there'll be reasonable.

24:14We'll go and talk to them about how we operate. I mean, the Wall Street Journal covered it today. Part of this, as is always the case, is personality clashes. you're like, oh, this is the way I look at the world. And this guy at the other side of the table looks at the world totally different.

24:28Harry Stebbings:Final thing on opening our Anthropik, and then we will move off them. The ultimate dealmaker that is Sam Altman closes$110 billion round, four X the size of the largest IPO ever. I mean, Jesus, you've got to give the man credit. I mean, what an absolute machine. Anything other than plaudits? Is there any money left in the world to fund these businesses? The$200 and$400 million in revenue seems relatively paltry compared to the$110 billion he just raised. Yeah, I mean, there's some meta question. I mean, obviously they're not public and obviously the benefits are inuring to a relatively modest amount of shareholders, right?

25:06All of that stuff. But it does make you wonder if we should even be talking about the IPO window or any of this crap. It doesn't even matter when OpenAI can raise$110 billion. Oh, we're all worried some B2B company can't IPO at 400 million, growing 40 % at 3 billion, what difference does it? It's so minuscule. I mean, it matters to the humans that work there, but it's not even relevant to the economy when OpenAI does 110. And they're going to do another one before the IPO, probably before the IPO if they can, right? Maybe not. It'll either be an IPO or another round like this, but it's a force of nature, right?

25:40First of all, it's clearly a fortune, and it is astonishing. Any way you cut it. It's like, you know, when you add up venture dollars raised, invested year to day, you know, you kind of go 30 on Entropic, 110, if you call it VC, is 140. You know, it's more than U.S. venture for all of last year. So these are astonishing numbers, right? I do wonder, it's a very odd circumstance to have a private round be Forex the size of the largest IPO ever, right? And it does make you wonder how that IPO gets done. And it's interesting, those little nuances here. Amazon's, I think, 40 or 50 billion. Some of it's upfront.

26:13Some of it's commensurate on either an IPO or AGI, which is just one of those weird things that some of the money only has to go in once the company either achieves AGI or goes public, which to me, and Jason, you mentioned a while back, exudes a little bit of the IPO support coming in. In other words, is this really 15 million now and 35 million as kind of a placeholder for the book on the IPO or

26:38Harry Stebbings:something. There are also precedents of, you know, NVIDIA investing$100 billion and then the kind of walk back of up to$100 billion. Is it that again? I'm genuinely confused. No, it's not quite that because NVIDIA talked about investing$100 billion. Remember, I printed out the press release and then they ultimately invested$30 billion. So they, you know, folded back slightly. Amazon came in for$50 billion, but of that$50 billion, it's not like it's a press release. It's actually a real commitment, but it's commitment on closing conditions that are either an IPO or AGI. So It's not money now. If you needed to pay your workers next week with that$35 billion, it wouldn't be there.

27:13When does this go public? You've got to believe that the next round for this, Antropic, and SpaceX are all public offerings. Articulate who writes the next check privately and what the investment thesis is. I don't think there's more capital there. It's hard to imagine another round after this. Therefore, by a process of elimination, at some point, you've got to go public. And the next round probably is a public round. An important point on an asterisk that we have a double asterisk to. So it's$110 billion round, but$50 billion from Amazon, of which only$15 billion is up front, right? The rest is AGI or IPO.

27:45But Amazon's own free cash flow has fallen to$11 billion a year because it's spending so much. OpenAI had to go to Amazon and they had to go to everybody on planet NVIDIA. And they're exhausting all, like Amazon doesn't even, it has the resources, but it does not have the free cash flow to fund its commit. Could Amazon do$150 billion,$300 billion? I mean, there's a limit here where the folks that did this round literally cannot do any more, right? And this is probably why Jensen walked the$100 billion back was there's a theoretical idea where it makes sense, but the world has changed and that's a lot of free cash flow, even for NVIDIA$100 billion, right?

28:20So we're reaching their limits.

28:22Harry Stebbings:I know this is an absolutely stupid property suggestion. You can both fire me for it. Is there a Sam Altman premium? We've spoken about the Elon premium before. If Sam were to say, I don't want to do this anymore, is there a Sam Altman premium? I don't think in the same way. His genius has been deal doing and the oomph and the chutzpah to raise 200 billion plus privately held. But Elon's genius at the margin has been the ability to pull off amazingly complex engineering projects sequentially. So I don't think there's the same premium there. And you could even, to make it a little more pointed as it were against Elon, just for a second.

28:58OpenAI trades at$700 billion pre this round, but that's because it's hyper-growing at, I can't remember, from$12 billion last year, from$3 or$4 billion in gap revenue to$12 billion, $20 billion ARR run rate. It's 30 or 40 times revenues for hyper-growth. Astonishingly, I continue to point out, Tesla continues to trade at 10, 12, 13 times revenue for declining revenue. The Elon premium is way higher relative to the performance of the underlying asset. You ask who's got the better premium, Elon or Sam. And actually, the easiest way to ask that question is to say to yourself, remove the person with the premium.

29:35Tesla trades at a trillion today. I think if Elon died tomorrow, they traded 200 billion. OpenAI trades at 800 billion today. I think if Sam Altman died tomorrow morning, we traded 600 billion. They'd go, we better get someone else to run the thing. Brett Taylor would be in charge, right? And Brett Taylor would be great, and he'd figure it all out, and they'd build a company and go public. If Elon goes, who's going to make the robots and who's going to make the robot taxi? And if you don't make one of those two things, you've got a car company with a declining car product line, flat revenue growth in a tough market for electronic vehicles.

30:04You'd be down 800 billion bucks. If Sam left, you buy Sierra for 80 billion, 10 % of the value. You buy out the shareholder, you know, whatever the math works, whoever gets what you do, you just do it overnight for 80 billion. And your problem is solved and possibly the company's stronger afterwards, other than the fundraising. It might be better. Yeah, agreed. And if you have one of the greatest technical CEOs of our lifetimes in charge of it, instead of a very brilliant, but ultimately non-technical founder, I mean, it's tough to beat Brett Taylor's background. And he's already on the board, right?

30:35But fundamentally, Jason, you are right. Fundamentally, you'd be like, oh, we're just going to build a company now. We're going to build ChatGPT. We're not going to have distractions. We're just going to be fine. I'm going to push you both before we move on. When does it go out and what price does it go out at? OpenAI? I think there is now a subtle, unspoken rush to the money that is taking place between those three mega cap companies. Everyone else is kind of to a rounding out on the sideline until these deals get done. I personally would say the sooner the better for everyone. So I'd love them to go public as quick as can and get it over with.

31:06The question is not when they want to go public, because I think if they could all wave a magic wand by the end of this year, I think that all three of those companies would wave the wand and say, let's be public. It'll be safer. I'm going to say October, and I'm going to say it's going to go out at$1.5 trillion. I think you can trade that in Polymer on some of these kind of tokenized bets. I mean, you know, which probably should be something we should do. I think it's a logical bet. They might actually seek initially a lower price to not stretch it for an IPO and then see what happens. The SpaceX IPO price that Elon is making up,$1.75 trillion.

31:37It's a crazy number, but it's not 2x the last round, right? So it may make sense to have a modest step up, but that's really just aesthetics. You know, the market will settle. I do think there's risk that they've exhausted some pools of capital from the round trippers, the soft banks, the NVIDIAs, and now Amazon. Like the fact that so much of the money of Amazon isn't in the bank today, to me, it doesn't count. Like maybe it sets the IPO up to Rory's point. Like that's great to set up to have 35 billion of your IPO pre-sold. Like that does make the IPO easier. Let's be clear. It's a gift walking in and have half your book sold.

32:11But if they've exhausted the money, then yeah, they should go public in October. I think it's right. Just a comment on the valuations. I mean, I'm not in the, oh, it'll be fine at 1.5. I think those are such huge numbers that they're very much predicated on the overall market continuing extremely strong. I mean, S &P, despite all the noise within the system and all the SaaS apocalypse, S &P is plus or minus 2 % from an all-time high and trading at a 20-year high in terms of any kind of trailing KPE basis. So this is selling securities at a time when people are hot to trot and buy securities. So getting it done in today's market, who the hell knows how it gets done.

32:49It could easily get done at an incredible price. But it is worth pausing and just looking at the vast distance between the valuation on any kind of fundamentals basis and the amount of leaning into the future you have to do to get to those kind of valuations. And it's kind of slightly different between them because OpenAI is a, it's growing fast, really fast, provided it continues to grow really fast for two or three more years, it all works. So you can pay, you know, what, 40, 50 times revenues. I mean, the fact that they even said that sentence at scale is how that one happens. And if there's an appetite to pay 40 or 50 times revenues at that point in time, you can do it.

33:26SpaceX is even harder because you're basically having to underwrite a fair slug of next generation technical risk. Admittedly, you're underwriting with the person who in the last 20 years has proven most able to deliver that technical risk. But you've got the whole Starship risk, and then you've got the next generation Starlink 2.0 direct-to-cellular risk, and then you've got the data centers and space risk. And you need all that time because the existing business is$18 billion growing 20%. So it's not obvious that it's worth 100 times trailing revenues for 20%. If that was a SaaS company doing 18 billion, growing at 20 % with modest profitability, Jason would be sneering and saying five times.

34:06I wouldn't be sneering. I'd be saying five times. Yeah, you would be. Yeah. I'd be lamenting it. I'd have my head in my hands, but I would not be sneering. I'd be commiserating. I'd be like, could I just go back to December 2025, please? Could I just roll back time? Just a heartbeat, just till the end of last year. The eternal, oh my God, if I'd known that what I know now, it has sold everything. But yeah, but you're right, Jason. And it's a big gap

34:29Harry Stebbings:between that and 1.7 trillion. You said if it was a public company doing, you know, 18 at 20%. Jason, before we started recording, you said something and I wrote it down. You said you thought every public company would miss their numbers. I mean, I don't mean to be negative. I think almost all the public software companies are just going to do worse and worse for the rest of this year. I think Mongo was down, what, 20, the largest drop ever after a strong quarter because they said they're going to growth will drop back to the teams, right? Even though they crushed their quarter. You know, you had Iran from Monday on the other 20 BC this week.

35:03It was great. But the public markets think that they're going to keep re-rating growth lower and lower each quarter. I just don't see any positives for the existing group of B2Bs. And Rory's point is we just need more good ones in to raise up the median and the numbers. And maybe it's that simple, but I think we got the SaaSpocalypse all wrong. It's not vibe coding that's killing us. It's just everybody has lost the way to growth. And I think because of NRR, because of revenue retention, because so many of these numbers are backwards looking, I think almost everyone is worse than it looks. You know, it's funny.

35:39I wrote it up this week. You could expand the basket very widely, but for the stocks that I follow, the most successful one is DigitalOcean. DigitalOcean's up 28 % this year. DigitalOcean, all these years to a billion in cloud revenue, like in some ways, very impressive to a billion, right? But on the other hand, like it's pretty good business to only be doing a billion, right? You're pretty, you could be critical, but you need to be radically accelerating growth and profitability at the same time. And you're looking at these public eyes and you're like, who the hell is going to radically re-accelerate growth?

36:11Who the hell? And that's why when I have to come up with my four to bet on, I could only find three, like I'm still going to do four but i could only find three because i can make the the case that this one's undervalued and that the markets are don't see the the inherent value in but the markets are saying you guys got to re-accelerate and they're all going to de-accelerate and so i just think the almost all of these public b2b companies are in worse shape than they look and while i wish we didn't have the saspocalypse man i just i think it's worse than vibe coding i think vibe coding is one of those minor threats to software companies in our lifetimes and i vibe code constantly it's a minor threat.

36:47And that's why they all have to cut half their teams to our conversation last week. I sounded so pressing. What are you going to do when for the next two quarters you keep, like you may even make the quarter, but you keep having to drop your earnings estimate and rate down. At some point of the course of the year, you're just going to have to cut half your team because otherwise you can't make the math work. Well, I want to talk about the team, but before I just want to put one caveat out there, right? You do have to take price into account. And let let me tell you what I mean by that. Yamango had a very strong quarter, modest delta in terms of future guidance versus expectations, dropped 25%.

37:20Why? Answer, it was trading at 40 times next year's EBITDA. When you're trading at a super high price, eight or nine times gap revenue, right? When you're trading at a super high price and you go from 30 % growth to even, I think the guidance is 23, 24, clearly assumption would be 24, 25 would be actual result. When you're trading at 40 times EBITDA, it doesn't take a lot to knock you off your pedestal. Conversely, a whole bunch of these things are now trading at seven, eight, and nine times next year's EBITDA, where even 8%, 10%, 12 % growth can probably make it at the very least highly unlikely to decline by 30%, and arguably more upside than downside.

38:00But why will they reaccelerate? I just don't believe these - I didn't say they reaccelerate, Jason. I think there's two separate things, and it gets you a block comment. You've got to do one of two things. I do agree you're right, You got to do one of two things. If you re-accelerate enough, then they'll cut you slack on profitability, provided you have some either profits or convergence on profits. If you don't re-accelerate, then you're right. All you're selling is a profitability story. And then we're going to segue straight to block. The only way to do that is to look at your cost structure and say, if my, I mean, I hate the rule of 40, but let's put it out there.

38:31If my revenue growth is 10%, I can subtract 10 from 40 and I come up with 30 % free cash flow required. So you're right, you start running the mat. It's just brutal because there's been the amount of spend that has gone to cloud and LLMs is like nothing we've ever seen before. And if you're a public software company, you've captured none of that. It's a disaster. Like it's a Titanic. It's worse than it looks because you can't figure out any way to take all of that spend and turn it into an agent and LLM that your 10 ,000, 50 ,000, 100 ,000 customers want to pay you more for. I mean, it is the biggest fail and own goal in our history.

39:10And it's going to get worse. There's so many public folks who were rolling out a beta or we've added a clod connector this week. And it's a disaster at this point in 2026. It is. And you can see it when a lot of these public companies, CEOs speak. They don't have the, like I was on the earnings call with Mark Benioff. He's got the confidence. He believes that there will be a lift from agent force. He growth already. Now, some of it is inorganic. Growth is up. And he believes he has a performing agent. Like I was there in the building. the dude believes okay no i hear you but i can smell the lack of belief in other public i know harry can too when he interviews and you can just smell it out of the pores and as a human being i have empathy but good god that's why i think because of retention it's all worse than it looks it's all worse than it looks because you can hide under multi-year contracts and annual contracts and price increases you had so much time like these three kids from stanford that figured out how to use Opus, why couldn't you?

40:06It's out there. It's not even that expensive. Why can't you figure out how to use Opus? Why can't you put your 20 best engineers and just freaking clone Harvey or 11 Labs or Lovable? How hard is it to clone those apps, guys? You all deserve to be fired. Actually, I thought Owen at Intercom had a really great piece just this week on what it took to take his existing business, gut it and build Finn on top of it. And that's what I meant when I said, Jason, it's hard, not from a technical perspective, that's part of it, but just from a fortitude to make all those changes, to put all your bet on the new thing.

40:42There was probably a year of feeling ridiculous because you're talking about the small thing and the big thing is so much. Customers are saying, why aren't you focused on the big thing? And he just described very well what it took to be bloody minded enough to make that happen. And you're right, Jason, I do think you are correct. That's the kind of attitude that any, I mean, the opportunity is there and it's, I'm interested to here, your take on Agent Force either this week or next week or whenever. But that's the kind of bloody mindedness it's going to take to push through. You do need it. And I just don't see it.

41:11I just don't see it across startups. And I don't see it in the public companies. I don't see. And now listen, Owen had to come back as CEO. There's complexity there too, right? But he's been brutal that this is a founder market and it's hard. And yes, it was harder for them because they had an institutional base. He had to partially retain, but also partially abandoned a lot of complexity, but woe is me. Like his points are all, we're all really good, but you know what? Maybe, maybe he got there a quarter or two earlier than others because it was in CX and support. Okay. So he could see the change earlier than everybody.

41:42It wasn't just going all in. It was that also he was in one of the two categories that changed the most quickly. Right. But what about the rest of the world? You've had time. You can go out there and say on Twitter, LLMs are fungible and that systems of record should benefit because we own what matters and LLMs are a commodity. I mean, give me a break. Show me 100 million. Show me 200 million. Show me 500 million. You've had 16 months now.

42:09Harry Stebbings:But I think Toby at Shopify is one of the most brilliant CEOs and technical minds. Gustavo, Spotify is too. I'm genuinely naive here. Are you telling me they've missed a beat as CEOs. No, Toby is dragging his company mercilessly into the AgendaCare, rolling out their Agenda Commerce. I don't know how successful it will be, but it'll be front and center of Shopify, right? It's becoming front of center. So, but he feels to me roughly at the pace of Salesforce. He probably should be faster, right? Because it's a more agile organization, but they're dragging their companies with real product into the future.

42:44and I think everyone else, they're already starting to fall into the event horizon, into a state of terminal decline that their teams don't want to do the work and that they don't have the ideas. They don't have the ideas. Oh, Jason, I rolled out AISDRs. Great, but you're a software company. Where's your agent? Where's your agent that goes out and does all the work for your customer base, right? They're just headed in the event horizon and they're trying to put on the jets, but it's it's getting tougher each day to recover yeah right we're gonna do a christmas party the

43:18Harry Stebbings:three of us and and jason's our i'll bring her upper yeah he's the movie yeah he's gonna be yeah he's gonna be the fluffer upper i listen if you're really in the game no seriously if you are in the game i will be your biggest interrupter i will use your product i will support your product i will say it's great that's why that honestly for a long time to no benefit enough that's why i was so supportive agent for us because we started using it and it works so i'm like i'm going to take this example and it is not perfect. Like I can tell you all about it more than almost I don't think there's that many people that use 28, five different, 10 different GTM agents, including Agent Force.

43:51We might be end of one and I can tell you the flaws and the issues and the challenges, but at least they're in the game. Armies of FDEs, armies of folks deploying custom agents and it will get better. And I will tell you it is still changing. Agent Force is constantly changing. It is not static, but like a real AI company, it gets better every month or two. It It keeps getting better and better and better like our AI tools are rather than be sticking to beta. So I'm not saying Salesforce is going to turn into 50 % growth next year, but I want to see this or better from anyone. Anyone in software, you got to be doing as good or better than Salesforce.

44:24I think you're hopeless. You're hopeless. Oh, our industry doesn't really like AI. Oh, you know, well, good luck to you. Good luck to you. I will bring the holiday cheer. I just want to reiterate my position in the boring middle here, which is I think the strawman of these public company CEOs are ignoring it totally. It isn't really true or fair. I do believe that most of these SaaS companies, I don't think they evaporate or go away. I think provided they get with the program, depending on the industry and market, there's a market where you've got plenty of time where AI is not going to be widely disrupted from a top line perspective.

45:02I'll talk about OpEx next, all the way to where it's obviously disruptive. I think it's well within the capabilities of highly compensated executives who have their ass on the line to figure this out. Most of the companies that already have scale should not be vanished from this, which is a different statement than saying they will ever regain their 20, 30x EBITDA multiples, still less, God forgive us, 20x revenue multiples, which they got in 2021. Here's the thing that I don't understand about the SaaS apocalypse, but this is what I think makes these companies terminal. OK, what happened through December 2025 is basically the public markets said, listen, we're actually going to give you a growth premium for ever lower growth.

45:41Like the top tier in 2025 was if you grew 30 percent or higher, you were, I think, on average, valued at 25 times revenues. OK, and this held even each year through 2024, our growth slowed and the markets were like, for whatever reason, the markets would say, listen, it's cool. We will ratchet down what we expect from public software companies. we'll ratchet. And then at some point in January, the market said no longer, no longer will we ascribe high growth premiums. And it came out of a shot in the blue. And this is why everyone is still stunned now, because it worked in this, like this deceleration, but multiples staying strong.

46:20If you were in the top quartile, it worked for three years. Agreed on the facts, not the stunt because you're right. Zooming out 20 years. I see them stunned. I think Harry sees them stud too. Then they just didn't look at the chart, right? If you look at the chart, it's really simple. No, it's your stock price fell. No, hang on, stop. But first of all, I agree with you on the conclusion, where you were at, right? There was 15 or 16 years of the bucket growing at an average of 30 % valued an average of six times revenues. Then there was two years of COVID bucket growing 40 % average of 20 times revenues.

46:53And then you're exactly right. What happened is we de-accelerated not just back to 30%, but down to 15%. And then the market said something stupid like, well, we're back to six times revenues. It's okay. Like it used to be. And you're right, Jason, it was wrong. Once upon a time, you were six times revenues and going at 30%. Now you're at six times revenues going at 15%. And you sat there for two years. And it's why when you do a chart that just shows revenue multiples over time, it's a stupid chart, because it looked like it had gone back to normal. But you're right, Jason, the growth had gone out the bottom.

47:26And then all that happened last year is people's eyes were opened and they were like, it's not a temporary growth decline because of X, Y, or Z. It's now permanent because of AI. Oh my God, what are we thinking? You should be at four times.

47:40Harry Stebbings:That's the movie. It's now permanent because of AI. That's a really interesting statement. We obviously saw following Jason's statement. I don't know if Jack was listening. I'd like to think that he and took Jason's guidance's instructions and announced obviously laying off 40%. It's kind of all under the hood of AI efficiency improvement. Is it truly that, or is it a very bloated organization that needed resizing? Jack's continuously overstaffed his companies and it was just a resizing with a mask of AI. Jason, you should go first because you called this last week. Didn't name the company, but you called the catastrophe.

48:18Well, look, I think people missed it. on Block in particular, I know that their profitability was way up, but I think their top line is only growing like 3%, something like that, right? So this story misses, everyone missed this. Everyone got suckered in by the press release that said profit per share, gross profit was up 27%. Okay. And that's true, but you only lead with that when you're not growing, right? When you're growing, you lead with revenue growth, right? So what are you going to do? I think this story is simpler than it looks. Jack, they're growing 3 % and he's completely given up on returning to growth, which I think most public software companies will get to during the course this year.

48:52They will give up. The CEOs will give up. This is my point. They will give up on returning to growth. They will give up. And he gave up. And what's your next play? You got to get more profitable, right? There's a limit where it's not worth, like more than 50 % operating margins isn't worth it unless you're an IP licensing shop, right? But it's the get it done because I got to get to my next state, which is hyper profitable. And so my only point is people reacted to this like this was a high growth tech company. It has been many years or at least years since it's been a high growth tech company.

49:213 % is pretty tough. I mean, a SaaS company at least can raise prices 4%. At least we have that in SaaS. We just go out to our customers due to the incredible features we've added this year, including changing the colors of our buttons. We're raising prices 6 % this year. I think there's a lot in that. Big picture agree. A mid-20th billion dollar revenue company, 10 % growth a year ago, down to almost no growth last year. So you've given up on the revenue growth. So there's only one button to press. You're exactly right. If you want to make the stock go up. So a couple of common stuff. One is on employee count.

49:52It had ballooned up. There'd be a couple years where it grew on 50%. And you've got to calibrate that because interestingly, if you look at revenue per employee or gross margin per employee, compared to SaaS companies, it actually wasn't that far off. But of course, it's not a SaaS company. It's a financial services company. And when you look at it on that basis where obviously revenue, you have all these interchange and pass-through costs, relative to best-in-class financial services companies, there was clearly fat to cut there. And Jason, you're exactly right. That's why they did it. But talking about AI, let me use the AI word.

50:25And there's two separate uses of the word AI. Are you talking about AI on your top line or just AI on your OPEX? And it's worth pointing out here, this is not an AI top line story. Salesforce is an AI top line story. AI is either going to increase your top line if you deliver agent force, or it's going to reduce your top line if someone else delivers agent force, and you don't. It's an AI top line story. This is not an AI top line story. I'm not going to use more at the margin, maybe a little. I'm not going to say no, because Jason will correct me like he did entirely correctly on YouTube. But cash app at the margin, or buy now, pay later, or square, AI is not going to fundamentally change the top line offering here.

51:06So this is not an AI positive or negative transformation story. All they're saying when they use the word AI is they're saying, dude, we don't make or sell AI to our customers, but maybe we can use AI to cut some OPEX. Is that true or not? I doubt it's true at the 40 % level. So when you look at it at that basis, it's not a growth story. It's not an AI growth story. It's a, we need to make the profits go up and therefore cut all these expenses and plan slash hope that some combination of people working harder and AI can allow me to service the customers at a much lower headcount and get the stock up 20%.

51:42The other thing, Jason, you're right is it is implicitly an abandonment of revenue growth as the plan out of here, at least in the short term. Yeah, I'm not saying that this doesn't give folks cover to make similar cuts. And I'm also not saying AI is exaggerated as the root cause. But this isn't quite the play people think it is. When growth is decelerated to 10 to 3, I mean, you're in a tough spot. And I just think where it may inform other CEOs is folks in the mid to low teens may adopt this. They may throw in the towel, not at 3 % growth, but at 12 or 13 % growth. If by the end of this year, they're like, you know what, this AI is such a force of nature, but I haven't found a path to acceleration by the end of this year.

52:24You may see people copy it just for that reason, because they're out of ideas. I want to ask a question with Jason. and I'm going to deliberately do it in a way to separate two things, AI on the top line and AI on OPEX. Let's assume there's no AI impact on the top line. It's some financial services business that just has no AI revenue left. And let's assume they're efficient beforehand, which I think Block wasn't, right? You could definitely argue there was some. What's your mental model of, if I have 100 people doing X whatever revenue this year, how many per year do you think a well-run company should be trimming based on AI?

53:00Do you have a mental model for that? Because I doubt it's 40 in one year. What's your mental model? Well, look, just one thing first, then I'll answer the question directly. I do think that even if you don't think that a company like Block is threatened by AI, I'm not saying it's like YouTube, but here's the thing I know, even just from my own portfolio, folks are building agentic applications that do what Block and others do, and therefore are displacing them because that's where the energy is. There's a lot of products at Block, right? There's a lot of products. But if you go back to some of the more simplistic products like Square, right?

53:32As agentic products process point of sale and other transactions and add more value, you can lose, even if you say the atomic version of my product doesn't really need AI. It doesn't, but when these agents are doing everything in your industry. So I think the agents are capturing so much value that there is just limited budget in every space and they're going to take budget away from you. So I don't think even folks that are immune, I don't think are immune because the new entrances will find ways to tap into that budget and add more value. In terms of cutting the team, honestly, Rory, I think everyone thinks 40 % of their team they don't need today.

54:09Every single CEO I talk to doesn't think they need 40 % of their team. And so I think that the block number will become the default. I don't need 40%. It's a gift.

54:18Harry Stebbings:I got in a bit of trouble, but I tweeted over the weekend, I spoke to three CEOs between 500 and 1 ,000 people, and all three said to me that they were cutting by a minimum of 20%. And I think this does create more acceptability around layoffs. It's the Overton window argument. I was stunned to learn that in recent memory, this was the largest percentage headcount cut. I saw a bunch of data on that where there's a few 15 % or 20 % cuts that were bigger because when someone like Amazon cuts 15 % or 20%, it can be 30 ,000 or 40 ,000 people. And this was, I think, from 14 ,000 to 10 ,000, I think.

54:53No, it was 10 ,000 to 6 ,000. 10 ,000 to 6 ,000. You were exactly right. I've been looking at the before and after headcount numbers. Because obviously, look, in venture-backed deals, there are occasional horrible moments when you cut by 50 % or 60%. But that's typically when you have 40 people and you lose product market fit. This is the biggest percentage change for a publicly held tech company in the last 20 years, which is just an astonishing statistic. So I think, Jason, to your point, it definitely expands the Overton window of what's doable if it works. Well, let me just give me just a simple example for fun.

55:25So I was helping a very hot AI company think about growing their GTM team. We get called into this stuff all the time now, right? And they're going from 10 folks in sales last year to 250 this year. Okay. Let me just ask you, how many of them you think are going to be great? 20. 20 out of the 250? Yeah, maybe. Maybe a few more. So look, a few years down the road, if you have to cut, this is going to be so easy. I mean, I know the human impacts are horrible, but I can't think of any company I've ever worked with north of 500 people where 80 % of the people were great. It's just managers of managers.

55:57It doesn't matter in the age of AI. Now, what's changing is companies are going to be permanently smaller to start. That is utterly changing. And that's why in some ways Block is a window to the past. It's like looking out to the galaxies out in the sky, because I don't think we'll build for the most part, companies like Block the same way today. We may stumble into them in times of plenty. This got them going from 10 to 250 in sales in one year. But when you get that bloated, I know we all want to say we don't lower the bar, but managers of managers always lower the bar. First time managers always lower the bar.

56:31It always becomes headcount driven and hegemony driven. And 40 % of these people, we just have no, even in AI companies, they have no idea what they're doing. They don't even know what my team, 500, 800 people. What are the 28 people doing in marketing again? They don't know. Yeah. It's funny because whenever you are like this, I always want to argue with you because you're so extreme on it. But, you know, sometimes I find myself realizing that you're correct, right? I mean, because I was just reflecting on this, like going back to capital versus labor, you In the 1950s, 1960s, the biggest companies were 300 ,000, 400 ,000 employees like General Motors, like Walmart had a billion at one point in time.

57:08The amazing thing now is Apple has 160 ,000, Google has 190 ,000. The trend says you're right because even before AI, the valuable companies have been the high IP, low headcount people. And you look at the trend today, you look at the revenue per employee at someone like a cursor, it's about the same already as Apple. maybe even a little higher than Apple. Apple's about 2.6 million revenue per employee. Google is 2.1. So these guys are already at that level at a much smaller scale. So I don't know if it's as extreme as you say, but the trend is definitely proving you're right. More and more valuable companies with less and less people.

57:46I don't think it trends to one. I don't think it trends to the billion dollar single person company, but the direction of travel is on your side of the table.

57:53Harry Stebbings:I do think we'll see an acceleration of layoffs. So with founders appreciating this kind of acceptability of doing large layoffs in the wake of this? I always hate the word acceptable. I think the more common, the harsher common is necessity. You know, in other words, acceptability sounds like it's a social thing. I wouldn't like to get rid of people's career just because it suddenly, quote, became acceptable. If you are subscale, growing sub 10 and kicking off 10%, if you don't take the actions and someone, remember, price clears all markets. I repeat myself over and over again. If you're only doing 10%, less than 10 % revenue growth and 10 % free cashflow, you'll be trading at four or five times and three or four times perhaps.

58:33And someone will know how to come in and buy you and make those changes. And then a month later, they'll be worth eight times. But for what it's worth, I think you do have a choice. I think Harry's point's an important one. And I don't even think it even matters at some level because it's the past, but I think the block thing frees CEOs to make what they believe is the right decision for the company without overanalyzing the horrific human impacts. They are now free to sit in the board meeting next week, probably. These meetings will probably all happen in March. And they'll be like, guys, let's just talk about Block calmly.

59:04I'm not saying we should do this. But what is given that we missed the quarter again for the fourth quarter in a row, guys, we missed, you said we were coming back and I get it, but we're at 110 million in revenue we missed or whatever, 400, we missed the fourth quarter in the row, what could we do like block? It's at least going to be a conversation, right?

59:21Harry Stebbings:I think also the extent allows them to cut deeper. The 40 % is a big number and I think it allows them to - Yeah, but also these companies are in the past. I think the future companies are just not going to hire this way. And the weird thing to think about, there's a chance we look back at 20 years of brute forcing revenue growth with sales, human-led sales and marketing as an anomaly in the era of software. In the old days of software, when I was a kid, software was wildly profitable, right? And then for two decades, B2B software grew like nobody knew until AI, but it was never really profitable.

59:55And we may look back and it's just jaw-dropping the efficiency of AI leaders. And we may just not go back to that old era. We may not go back. And we may also say, listen, those double or triple sales quotas for traditional software companies, and just let the chips fall where they may. Just let them fall where they may. Like, I'm not going to do the 400K quotas anymore that you wanted the 500K.

1:00:16Harry Stebbings:I'm done. Why don't we talk about one of the future companies that we mentioned on the revenue headcount? Because I'm confused, chaps. I speak to everyone about their product teams and their engineering teams. And everyone has moved off Cursor and moved to Claw Code. I tweeted about this the other day. And thousands of people comment this. And everyone is in universal. Cursor's dead. Claw Code rules all. Then Cursor announces their movement from a billion to two billion in revenue in three months. Rumors of secondary round being done at 50 billion. Maybe in my favorite saying that Rory often said about benchmark, reports of my death have been greatly exaggerated.

1:00:56Harry Stebbings:And I thought of that here. This is one of those situations clearly where VCs judging the world based on their portfolio versus the real world are out of sync. Literally right before this all came out and blew up, I had two board meetings of my fastest growing portfolio companies. And they all joked about how folks weren't using Cursor. And one said, mostly it's only grandpas at the company that still use it. And the CTO stood up, who's pretty young, and said, grandpa over here, I still enjoy it. And he's like, there's a couple of us that still use Cursor. And then I was with another company that is blown up.

1:01:28And there were two people that used Cursor. So you heard these stories all the time and you just assumed that everyone had mainly moved to CloudCode directly, right? And product teams had too. And you just assumed that's the way the rest of the world works. And that's why Cursor was smart to slip this news release to Bloomberg that they'd happened to double in the last 90 days. So our portfolios are not representative. I think, listen, this is as much as I know, other than we all made the same jump to the conclusion based on our 40 portfolio companies. but if six you know they said 60 of our revenue is enterprise and probably the answer is right there right is that this is a this is a trusted tool with a lot of things including guardrails that can manage agentic swarms and others they're pointing out how banks use them and other conservative enterprises and are just rolling them out and i don't know this to be true but if cursor is the more conservative choice that's not the worst place in the world to be especially if you can pick your model maybe that's the answer but it's not it's not my five fastest growing investments.

1:02:28That's not where they're crushing it today versus six months ago. But it's so funny. We got it wrong. Like numbers don't lie.

1:02:33Harry Stebbings:The feedback that I got from the tweet was very simple from insiders. It was twofold. It was one that you have enterprise crushing it, exactly as you said. And then two, actually just annual subscriptions, their cycles not being complete yet. And so there will be a wave of unsubscriptions and that churn will be real on the consumer side. But that can't, Rory's the expert here, but even if that's true, and it's a really interesting topic in general. You don't go from one to two billion in 90 days. If you're having massive, like deferred churn at the end of the contract, that's a different issue that's going to come down the road.

1:03:05I mean, that is growth that is just massive market pull, like epic market pull to grow that quickly. Just to sign the deals takes so much energy. The lesson is never underestimate big markets and momentum. If you come into last year with the momentum they had or the middle of last year, even if things are slowing at the margin, even if at the marginal startup, you're losing to cloud code. You've built your name. You've built your brand. Every enterprise is trying to adopt coding. The adoption cycle there isn't, oh, I tried cursor yesterday. I'm going to try cloud code tomorrow. It's like corporate's got to approve.

1:03:41Purchase order's got to be raised. We got to have security review it. Legal's reviewed the contract. We signed a deal. You're not going to run in next day and say, we should switch to Claude now. It's like, no, we're going to use this for the year. We'll do an eval mid-year, and we'll think about it next year. I mean, Jason knows better than me. So the bigger high here is when you're in a great big market with a massive trend of adoption in the course of two, three years, if you've got your share of that, you're going to do just fine. I mean, at the margin, are you probably losing share relative to Claude, at least in the last three months since the last set of models?

1:04:13Probably, but it still means a big outcome. I mean, we talked about this two or three months back, it's clear that they're going to be one of the two or three players at scale. And scale gives you a lot here. I would add, you're right, Harry, numbers don't lie, but I haven't seen the numbers, right? And I haven't seen the revenue and I haven't seen the gross margin, but you can easily see how someone with an early lead would be able to maintain that lead, even when you've got a super credible competitor who can bundle a product into an adjacency, taking some of that space because the market's expanding enough to cover a multitude of sins.

1:04:45Maybe this is the real sentence, Harry. The knife fight doesn't start until the TAM is like 60, 70 % saturated, which by the way, happened to SaaS in 2021. And that's when the knife fight started. Suddenly you're like one in two of every new customer is a switch. Now it's time to kill the other guy. Until then, let's all grow one big happy family. We all have a win rate of 60%. We don't compete against each other. All those happy things that you hear in the board when the market is so big that we're not overlapping. Once things get saturated, then it gets uglier. Yeah, there was, I think there was a tweet, I think there was a quote or something from someone at Cursor.

1:05:20I might be wrong. I think it fits. It's an interesting point, which is that Barclays had just rolled them out. Okay. That was the first agentic coding product that was approved at Barclays. Okay. And banks are a big deal because they have the biggest budgets, but they are conservative at the same time. It's an odd dichotomy, right? They're super aggressive and super conservative. And we might've gotten Cursor wrong. I mean, Cursor is more enterprise. You can run it without data retention. You have full SSO. You have role-based access controls and all these things that you just got to build in the enterprise, the right audit logs, the right hooks.

1:05:50And to a CISO or CIO, as long as the product works, that could be 10 times more important than what someone in the other building wants. Okay. And the other thing that's happening right now, good God, is it's been in all of these products for a while, but in Claude 4, Opus, these swarms of agents got really good. Okay. these swarms of autonomous agents. And Michael from Cursor wrote this, not only did they leak the 2 billion, but he wrote a post, which, you know, a tweet article, which seemed kind of weird, but talking about how the whole future of Cursor is sort of safely managing these autonomous agents.

1:06:23Not, you know, the early days were clicking tab to finish a line of code, which was what Codium and Windsurf got going with. And when you have swarms of autonomous agents, good God, they're not totally safe. Much as we all love our open clause, they're not totally safe. And the more of them you have that are autonomous and the more they can touch your data, they're not safe. And so if Cursor can do both, if it can unlock the power of the swarms of autonomous agents running in real time, running concurrently and make it safer, I would got to think 95 % of CISOs want that one. And a lot of conservative organizations, the cranky CTO doesn't get to make all the decisions like at our startups.

1:07:04At our startups, the CTO decides what the team's going to use, right? But good God, at a bank, what if you repeatedly leak everybody's confidential data? I mean, it's exhausting to have to go through that. This is not a joke. Like every agent will leak data if it's allowed to. Like every single agent will. That's how goal seeking works. Being the most enterprise leader in these mature spaces, you can win because 99 % of the world is not like us. Jason, sold. I mean, all you have to do is look at Azure's market share in cloud, where for 20 years, the value proposition, having said in millions of board meetings, not millions, but tens of board meetings where we've talked about, you know, we're running on AWS, should we run on Azure, our customers want to run on Azure.

1:07:44The value proposition of Azure for 20 years was it's not nearly as, it's not as good, but it's getting there. And Microsoft have great relationships with every CTO, so it'll be fine. You're exactly right. You know, there's a large amount of software selling that can be done on the basis of safety and integration and selling all those boring bits. What you're dealing with is a massive market where everyone's making adoption decisions in an extraordinarily short period of time. And let me repeat what I said earlier, is they're both going to crank as fast as they can. They're going to. And as people make initial decisions and more and more of that market has an initial buy decision made, you're going to start running into each other.

1:08:23Is that going to be later? The competition is just going to intensify. They're not, I mean, let's just do it. If cursor went from one to two, I think in the same period this year, I saw some entropic statement about, you know, we've added$2 billion in ARR year to date. So both of them are exploding. This is a huge, this is the biggest freaking market. And those are the two most viable players in it. Going back to last week, it's the Fortnite effect. Like cloud will, code will keep doing more and cursor has to keep ahead. That's the job. Totally. Exactly. Apparently 60 to 70 % of cursor model calls are still using Anthropics API.

1:08:56Okay. So even of that 2 billion, a lot is flowing back through to mom and dad. This was the point Michael Cannon Brooks made the other day. And Claude, even if they may not even care about cursor as a team, but they will inherently build all these features as an enterprise play. And so the bubble will shrink and then cursor just has to do more. And what we've learned this week is they've kept ahead. They have kept ahead of the Fortnite storm. They've kept, and every CEO out there crying and saying how hard it is and that hasn't kept ahead, that Fortnite storm is going to shrink to a pixel and they're going to die.

1:09:28Jason, I think you're right. That is the sound bite. I mean, the correct response to that is, congratulations. In the great race for what looks like a$50 to$100 billion minimum coding prize, you have conquered level three, which means unlike a whole bunch of people who are stuck in a back in level two, you now get to go to level floor and play again. It turns out it's hard to make$100 billion, but they deserve all the credit for being the early winner, cranking, and keeping revving the story. I mean, it also, just again, back to the swarms of age, it's just worth stating. And again, this is obvious, but just to say it, if you look at the cursor story, I mean, he spelled it out in that kind of post, which I thought was very good.

1:10:05If you're not, this is back to Jason's point, if your story is not changing significantly every six to nine months, you are probably falling behind. In fact, not probably, you are falling behind. You know, you were autocomplete. Then you were an IDE. Now you're agents. Now you're swarms of agents. These models are moving so quickly that the technology is moving so quickly that the prize for winning is to reinvent the company from scratch and the product from scratch every six to nine months. Congratulations. It's a fun game. But the prizes are great. You know, the one thing I'd still love to know about Cursor, and it is incredible, the growth is, and not to be very 2025 about it, but the Cloud API is expensive.

1:10:41You know, I've measured our API calls. It's so much cheaper to run something inside of Claude. My God. So like, I mean, I'm on Claude Max. Amelia runs out of credits using Claude desktop and everything. Or she runs out of time. She doesn't even run out of credits. But what I get for a hundred bucks a month, and then I track what some of our API calls costs. And for a good prompt, a good call, it can be well over a dollar. And maybe for code, it could be more. Like that adds up really quickly. And it is, whether you think it is subsidized, whether you think Anthropic is subsidizing its own native use or not.

1:11:14Their margins are strong. It doesn't really matter. So that is still the more like hooray, you hit the top line, but when you're still paying probably rack, like I can't imagine Anthropic is so desperate for Cursor's business. They're giving them a massive discount, right? Harry may find that out through his network, his input, but if they're paying close to rack rates, which I think they are because they also say you can bring your, your, your key with you. Like if it's cheaper, bring your own API key with you. It says there's not much of a discount, that remains your ad anthropics whim because they're already subsidizing their own product.

1:11:47Totally. We're lucky people are not that, no matter what anybody says, we're not that price sensitive today. It was super interesting. I got to give a shout out to Tamash, who we had on here a few months back, did an interesting post just today as, you know, basically, would you buy, it was a good metaphor, I should remember when I can, basically just looking at the pricing of, you know, top of the line frontier models versus six month old open source, Chinese open source models, and the 10, 15, 20x difference in cost per token. It was a good piece. And you're right, right now people are paying full rack rate for the new stuff because the new stuff is so great.

1:12:21His point he was making is it's only six months from so new that it's amazing to, oh my God, you can get it open source for$120 at the price. And it just really, again, brings home pace of change and the need to be on top of it. I think OpenClaw confused things, but the power of running swarms of agents autonomously to build software, the rate of change, we think the rate of change is like, I know you didn't literally mean it, but the way you described Tomas's thing suggested change might be slowing down, right? And we might get a benefit of these cheaper models. It just, I know you didn't suggest it, but there was a hint of it.

1:12:53I think it's going to radically accelerate this year because what changed in December, so like, listen, I've been on REPLIT, not to talk about forever about REPLIT level, but I've been on it since June. And when I started, you couldn't finish anything. You'd ask Replit or Lovable to build an app. You remember in the early days, Harry, and you'd get a lot of buttons that didn't work. Okay, nothing worked. They'd be fake buttons. Everything was fake, right? Then it got better and better. And then by December, especially with Opus 4.5, all of a sudden it could fit. It wasn't just you could have a code for hours, whatever.

1:13:21That doesn't really matter for a lot of use cases. It could finish apps that worked, like really worked, right? And then on our team, Amelia took it over and she built an entire AI VP of marketing that is better than anything on the market. And she finished it without any drama. Like it took work, but she just completed it. It's in production every day, doing all of our marketing, not just execution, but it has all the ideas. It's like how? It wakes up every morning and tells us what to do with data. It's a little freaky. And one of the many reasons was these multiple agents running in Swarm and working on the software together.

1:13:52An architect, a security expert, a backend expert, a database expert. And Replit just did one thing early, which is, and maybe Cursor did this too, they built a framework so you could use these multiple agents together efficiently before you couldn't clawed, right? You could do it earlier. And so now that someone that's just very smart can birth an AI VPN that marketing literally works, in six months, the applications we will to build, our jaws will just drop. Already, I don't even know what to do at Demo Day. We literally got a sponsor that just raised 50 million. Their website was all built and lovable.

1:14:26We were just laughing about it, but maybe that's not funny anymore. Or maybe these apps are so good. What do you mean you don't know what to do for demo day? I think I guess. Because if it's, what's his face from Angel List said, software is uninvestable. It should have been on the show. It should have been a topic. Okay. I agree. And I'm struggling with it. And what I mean is you can show up to a demo day and build anything you fucking want now in any of these coding tools. That's really good. That is so much better than anyone would show up to a demo day 24 months ago. 24 months ago, half the folks would show up.

1:14:58they didn't have a product. It was barely working. You could make fun of it. We went through it and now you go and like, there's no excuse to not have something that's like, great. Hey, I could take what we built. Amelia and I could show up to YC and say, we built this AI VP of marketing. It's managed a million marketing transactions. It would blow your mind. And just to be precise, Jason, I mean, cause the sentence software is uninvestable. I mean, if software is uninvestable, why bother making the demo at all? Because it's not investable. So clearly saying is, you don't invest on a demo anymore, because a demo simply means 24 or 48 hours earlier, you kicked off a coding project, and you got it done.

1:15:35So there's no information in the demo anymore. I don't think that I think for most cases, I don't think there's any signal or information in a demo anymore. Yeah, agreed. So I think at the early stages, there's no that that so that's what you mean by demo there, because the software is investable. Obviously, it turns Turns out Microsoft stock is holding up pretty well. So software is uninvestable. It's one of those hyperbole statements, right? Well, what I mean is, listen, I had one of the reasons I was modestly successful when I started investing is I was a founder that turned into an investor, okay?

1:16:02And one of the superpowers you get when you make that transition is you know what's better than you. You know the CEOs that are better than you, and you also know who's better at building software. So when I would meet a founder that week for week, pound for pound, had shipped better software than I did, I knew they had a decent chance. Like if the demo blew me away and the CTO blew me away, even if they're a couple thousand in revenue, I'm like, these kids can't lose.

1:16:28Harry Stebbings:Jason, can you name one founder, one founder who is able to create architect, maintain agents in the way that you have done? And I'm not blowing smoke up your ass, but Rory, I think this is where Jason's like, oh, it's going to accelerate so fast, so, so fast. I don't know one founder who has built an AI VP of marketing in the way that Jason has done. I do think I'm ahead of most of the, listen, there's obviously, there are folks just building agents that are so far ahead of me. I can't even, they mock me on X and I deserve it. But I would say for your average AI focused B2B founder, I am ahead of them on this stuff, right?

1:17:05Because I've been doing it for six months longer. They'll eclipse me later in this year, but they don't get it. I'm sure you're getting investor updates in March, which even talk about how they're stunned with how much more productive their team is, right? We're all getting these and like, they're just stunned. Like, I know we've been talking about this, but now it's finally happened. Like, it's not just a few more pull requests and this and that. They're literally, their jaws are starting to drop in March because of what they built in February and late January with these tools now because they can finish stuff.

1:17:32And when that 10X is this year, here's the thing. Like, Like the rate at which your product has to accelerate will be like nothing we've ever seen before. That's the real version of software is not investable. The real version is there's going to be infinitely more software. So software alone will not be a competitive advantage. So there will still be extremely large demand for software. And there as well to that will be very big software companies, but they will have to do something more than, hey, I wrote a bit of code for this particular vertical and this particular use case. That's not just going to get you there.

1:18:06It's going to be some other elements of competitive advantage around network, around distribution, around moat, around vertical knowledge. That's the true version of the statement. Yeah, I think it may. And listen, at the later, you know, investing in 11 labs today is it's a very coherent bet, right? It just makes this idea that you could judge early. If you had the right background, that you could judge early stage experience better than many and write a check very different. And even more so, listen, I had two investments. They weren't huge investments, but they weren't tiny. Recently, they did a million or more their first week in market AI investments because the demand was so strong.

1:18:39It's not one of them. Literally, 45 days before, 50 days before they were showing me a demo, I'm like, guys, I know all the vendors in the market. I put it back in the oven for a little while. I don't think it's competitive. And then you roll out and you dominate the market. There's a lot of reasons. But that level of pace we just didn't see before is going to accelerate. So how the hell do you pick favorites? How the hell do you pick favorites unless they had, what's his name? Frankel from, what's his name? Harry that did Sonoma.

1:19:09Harry Stebbings:David Frankel. Yeah. Yeah. He was, he said he had as one of his never too braggy ones. I was the only pre-seed investor in Sonoma, which is 300 million in two years. Right. And he's like, why did I invest in it? He's like, well, PhD from this masters and that understood the whole space. I met him. Everyone said he was the smartest guy in the world. I mean, that signal still exists in 2026. Do you want to hear a joke? What's the joke? He tried to bring me into that round. Well, you should have done it. You should have done it. Oh, no. He probably saw that that you couldn't see quickly, though. That's, you know, that level of depth, right, that you couldn't see, right?

1:19:44Harry Stebbings:Rory, are you going to have your bets ready for next week? I will have them for next week, Howie. I will have them. There we go. I'll give you an allowance because it's 10 o 'clock in London. No, I appreciate that, though, and I will. I genuinely will. But I'm still up on my world cloud. I'm up about six or seven. I was up 6 % at one point in time, which is the wisdom tree index of all SaaS. I just, yes, as the idiot version of that. So we're remembering. Now, I haven't looked at today and it's been pretty grim. So who knows? But yes, I will have my act together for next week because it is late in the day there in London.

1:20:19Harry Stebbings:But before we leave you today, I run 20VC Fund and I get this question from founders all the time. Harry, I can't find a good.com. Do you have a hookup? Let me tell you now, the answer is always going to be no. I don't have a guy or gal for that. I do have a recommendation though. If you're building a tech startup, get a.tech domain. Tech startup,.tech domain. It couldn't be more simple or obvious. As an investor, I appreciate founders who put thought into their branding. When I see.tech in your name, it tells me right away that tech is at the core of your build. It'll say that to your customers too.

1:20:50Harry Stebbings:A clean and sharp domain like.tech pays off in the long run. Look at the companies using.tech. nothing.tech, onex.tech, aurora.tech, ces.tech, ultra.tech, alice.tech, neon.tech, blaze.tech, pi.tech, great tech companies. They all use the.tech domain. These are my two cents. If you're building a tech startup, don't overthink it. Secure your.tech domain from any registrar of your choice. While.tech gives modern companies a home online, checkout helps that home convert by turning traffic into revenue. Over the past 15 years, Guillem-Puzas has led Checkout.com through what he calls the velocity years, a period of hyper growth with relentless product building.

1:21:31Harry Stebbings:The lesson, high growth is a gift, but it demands ruthless focus. As his mother put it, play the game you're good at. For Checkout.com, that game is digital payments, obsessing over data, chasing basis points, and compounding learnings over time. And that discipline is paying off. 2025, Checkout.com processed over 300 billion in total volume, up 64 % year-over-year, and return to full-year EBITDA profitability. They now support over 1 ,000 enterprise merchants globally, including 63 that process more than a billion annually, with brands like eBay, Vinted, Amex, ASOS, and Tmue. Guillaume's message, though, it's pretty clear.

1:22:06Harry Stebbings:They've earned the right to win anywhere. Now, they're investing in innovation across marketplaces, issuing, financial experiences, and agentic commerce. If you want payments built for what's next, talk to the team at checkout.com. That's checkout.com. While checkout powers the moment money changes hands, invisible powers the people behind the work. Why don't we hear more real AI success stories from big companies? The models are insanely good, but implementation is the problem. It's really, really hard. There's data all over the place. There's legacy tech and manual workarounds. It's a Ferrari engine in a shopping cart.

1:22:42Harry Stebbings:Meet invisible. Invisible trains 80 % of the top models and then adapts them to the messy reality of your business, take the Charlotte Hornets NBA team. Invisible took years of game tape and analog scouting notes to go from uncertainty to a draft pick and Summer League Championship win in weeks, not seasons. Get the data in order first, and suddenly AI can do almost anything for you in the enterprise. If you want AI that hits the P &L, go to invisibletech.ai forward slash 20VC.